Understanding the new SBTi FLAG sector methodology

Understanding the new SBTi FLAG sector methodology

In March 2023, SBTi released its new "Forest Land and Agriculture - FLAG" carbon accounting methodology dedicated to the land and agriculture sector. This sectoral methodological clarification increases the level of carbon accounting requirements that companies with forest, soil and agricultural land activities must meet.

Naal Narayanan

Naal Narayanan

Climate Content Manager

Update :

SBTi FLAG, the new sector guide of the Science Based Targets Initiative

The Science Based Targets (SBTi) initiative was born in 2015 from a collaboration between CDP, the UN Global Compact, the World Resources Institute (WRI) and the World Wildlife Fund (WWF). SBTi uses an established scientific approach and data - Science Based - to assess the targets that companies voluntarily set themselves to reduce their greenhouse gas (GHG) emissions.

A company's GHG emissions reduction target is considered "science-based" if it is scientifically credible with respect to meeting the Paris Agreement's goals of limiting global warming to well below 2°C above pre-industrial levels and continuing efforts to limit warming to 1.5°C over time.

The Science Based Target Initiative determines whether the targets voluntarily set by companies are ambitious and realistic enough to help achieve the climate objectives set by the Paris Agreement. As such, it offers companies a clear pathway to limit their emissions while adopting a sustainable business model.

With this in mind, SBTi is working in particular on the construction of new sectoral methodologies in order to support all companies in their decarbonization trajectory. Forest Land and Agriculture (FLAG), the latest sectoral methodology designed by SBTi, clarifies, enriches and strengthens the SBTi method and requirements for players with agri-food and forestry activities in their value chain.

SBTI Flag, SBTi's new sector methodology

Which companies are affected by the new SBTi FLAG methodology?

Methodology SBTi FLAG methodology is aimed at two types of stakeholder defined by SBTi.

First, companies with activities based on forest, soil and agricultural land use must define a FLAG objective:

  • Forest products and paper
  • Food production - Agricultural production
  • Food Production - Animal Source
  • Food and beverage processing
  • Retail of food products
  • Tobacco

The second type of company concerned is those belonging to other sectors of activity but having at least 20% of their global emissions on scopes 1, 2 and 3 linked to the exploitation of forests, soils and agricultural land. For example, a company in the retail sector with at least 20% of its global emissions from land use will have to set a FLAG target to reduce the emissions concerned.

When will the companies concerned have to apply the SBTi FLAG methodology?

The timeframe for implementing an SBTi FLAG target differs depending on the date of commitment of the companies to the Science Based Targets Initiative:

  • Companies that set their SBTi goal before January 2020 must set a FLAG goal by December 31, 2023.
  • Companies that set their SBTi goal after January 2020 and before April 30, 2023 must add a FLAG goal by December 31, 2024
  • For companies setting their first SBTi goal after April 30, 2023, the FLAG goal will be made mandatory upon submission of their SBTi goals

Which activities are covered by the scope of the SBTi FLAG methodology?

SBTi FLAG's scope covers three areas, Land Use Change (LUC), Land Management and Operations (non LUC) and Sequestration.

1. Land Use Change (LUC)

This first category includes CO2 emissions related to land use changes. This type of emissions is rarely taken into account in carbon assessments because of the small number of actors involved and their relative difficulty to measure; yet these emissions should not be ignored. Indeed, replacing wetlands by agricultural fields, for example, represents a double environmental impact: (1) the destruction of the wetlands releases the CO2 that was stored there (2) which prevents the future capture of CO2 by this same natural environment.

The FLAG methodology proposes to finally take into account CAT activities and covers the following:

  • deforestation
  • forest degradation including conversion to plantations
  • conversion of coastal wetlands, mangroves, seagrasses and marshes
  • conversion, draining and burning of peatlands
  • conversion of savannahs and natural grasslands

In addition to reducing indirect and direct emissions from CAT, SBTi requires SBTi FLAG-compliant companies to comply with a commitment to zero deforestation from 2025.

2. Agriculture and Land Management (Non-CAT) 

Whether it is for specific practices, the use of machinery or the production of fertilizers, the second category includes all emissions related to agricultural production, including livestock.

The following activities fall within the scope of the FLAG sector:

  • Enteric emissions
  • Flooded land for lowland rice
  • Manure management
  • Incineration of agricultural waste
  • The use offertilizers
  • Crop residues
  • Fertilizer production
  • The machines used in the farm
  • Biomass transport

3. Carbon removal and sequestration

This last category is the major methodological innovation of the SBTi. The new scope allows for the accounting of carbon emissions sequestered through the introduction of responsible agricultural practices on farmed land. The major groups of agricultural practices identified by SBTi are:

  • Forest restoration and silvopastoralism.
  • Improved forest management, including optimization of rotation times and biomass stocks, reduced impact logging, improved plantations and forest fire management.
  • Agroforestry, which allows for carbon sequestration by integrating trees into farmland and pastures.
  • Soil organic carbon enrichment, which includes erosion control, wider-rooted plants, reduced tillage, cover cropping, restoration of degraded soils and biochar amendments.

SBTi nevertheless reminds us that the carbon sequestered by these different agricultural practices is only accounted for if these actions are carried out on the exploited land of the value chain . Carbon offsetting mechanisms, which by definition are carried out outside the value chain, are not accounted for in this new methodology.

Key principles of the SBTi FLAG methodology

From now on, companies concerned by the SBTi FLAG methodology will have to have two separate SBT targets.

  • A first "classic" SBT target, named "Energy/Industry", will have to cover all non-land related greenhouse gas emissions. For this target, the general SBTi methodology will be applied and this target will have to cover (among others) all direct and indirect GHG emissions related to electricity consumption, fossil fuel consumption and transportation.
  • The second "specific" target, called "SBTi FLAG", will have to cover all land-related emissions, based on the new SBTi FLAG methodology. For this second target and depending on the company's activities, two calculation methods will be possible: a "commodity" approach in intensity, and a "sector" approach in absolute contraction.

For supply chain actors, SBTi proposes to set absolute reduction targets for all FLAG sub-sectors. This methodology simplifies the establishment of trajectories for large corporates by avoiding the need for differentiated trajectories by type of activity - forestry, agriculture, livestock, catering, etc.

For supply-side players with agricultural and/or forestry activities in their direct scope (scope 1), upstream of the value chain, SBTi has identified 11 commodities with specific trajectories that can be adapted to 26 regions of the world. This methodology makes it possible to set decarbonization targets adapted to the emissions profiles of each commodity within each region. A kilogram of beef is not produced under the same conditions in France as in Brazil, for example. Mechanically, this differentiated methodology encourages suppliers to avoid relocating their activity and to improve their practices locally in line with their own decarbonization trajectory.

How to effectively use the SBTi FLAG methodology in your company?

Admittedly, the SBTi FLAG methodology is more rigorous and demanding than the general methodology for actors with agricultural and/or forestry activities in their direct perimeter (scope 1) or in their value chain (scope 3 upstream/downstream). However, committing to an SBTi FLAG trajectory will enable these actors to better value their virtuous practices and accelerate the transition of their organization towards a sustainable and efficient model in tomorrow's world.

SBTi FLAG is obviously only one step in a company's journey to achieve its climate objectives . This new sectoral methodology should complement a set of tools and best practices on the various environmental factors. The carbon accounting of a company wishing to define objectives in accordance with SBTi FLAG will necessarily have to be reviewed in the light of the new details expected by the methodology.

In order to achieve its ambitious new goals in line with SBTi FLAG, the company's transition plan to achieve its new goals will also need to be updated, its robustness reassessed (e.g., following the ACT methodology), its funding rediscussed, and its operational deployment replanned.

What the new SBTi FLAG methodology portends is increased communication and collaboration of all value chain actors . Synergies will be key to enable ecosystem regeneration, land reforestation and the deployment of modern and sustainable agricultural practices. The burden of transition will not have to fall solely on producers, who typically feed into multiple value chains. As a company with agricultural and/or forestry activities in its indirect scope, it is essential to engage in a dialogue with its suppliers, with its peers and with actors in other sectors whose activity relies on the supply of resources from the same farms.

At Traace, we have been preparing for months to help our clients serenely integrate the SBTi FLAG methodology. We are working on this with Sodexo, which is one of the 18 multinationals that participated in the SBTi FLAG pilot phase, and will probably be one of the first companies to have an SBTi FLAG certified target.

Want to take the lead and build your SBTi FLAG target? Let's talk about it!

If you would like to learn more about the subject and find concrete solutions to decarbonize your agribusiness, download our white paper "The carbon challenges of the agribusiness sector: Reducing its emissions and capturing those of others".

Source: https://sciencebasedtargets.org/sectors/forest-land-and-agriculture

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